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Unit-3 Basic Accounting Terms and Concepts

This unit explains some of the terms which are commonly used in accounting and also the basic concepts underlying the accounting system.

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The following is the assets and liabilities position of Srinivasa Traders on October 1, 1987: Assets: Cash Balance Rs. 3,000; Furniture Rs. 5,000; Building Rs. 50,000; Debtors Rs. 22,000. Liabilities: Bank Loan Rs. 10,000; Creditors Rs. 15,000. Find out the amount of capital on that date.

Mr. Ghansyamlal carries on ready made garments business. A few transactions are given below. Identify the transactions to be recorded in the books of his business. a)Purchased a typewriter for Rs. 6,000 for office use. b)Paid salary to the office typist at Rs. 350 per month. c)Bought a show case for Rs. 2,000. d)Sold old domestic furniture for Rs. 500. e)Purchased cloth for garments for Rs. 10,000. f)A shirt worth Rs. 250 is taken home for his son. g)Entered into an agreement to rent a shop in Sadar Bazar. h)Paid Salaries to his salesmen, Rs. 1,000. i)Paid Salary to his domestic servant, Rs. 100. j)Appointed Satish as an assistant in the shop. k)Borrowed Rs. 5,000 from Mr. Dyanchand for business purpose. l)Mr Rakesh, one of the salesmen, met with an accident.

Mr. Rakesh started Rakesh Trading Company with a capital of Rs. 30,000. The company also borrowed Rs. 10,000 from the State Bank of India. The firm purchased a delivery van for Rs. 20,000, furniture for Rs. 5,000, typewriter for Rs. 6,000, account books and other stationery for Rs. 500. It has purchased goods on credit from M/s Gumcharan Singh & Co., for Rs. 4,000, and from M/s Lalwani Traders for Rs. 3,000. It has sold goods for cash to Mr. Peter for Rs. 2,000 and Mr. Ali for Rs. 4,000. It has also paid Rs. 300 for electricity charges, Rs. 1,000 for salaries, and Rs. 500 for rent. From the above information, list out the assets, liabilities, incomes and expenses.

The assets of a business on December 31, 1987 are Rs. 50,000 and capital is Rs. 30,000. Find out the amount of liabilities.

Krishna has invested a capital of Rs. 80,000 on June 30, 1987. He purchased goods from Suresh on credit, amounting to Rs. 20,000. Find out the value of assets.

What do you mean by accounting concepts? Briefly explain the accounting concepts which guide the accountant at the recording stage.

What do you mean by double entry system? Distinguish it from single entry system.

Show the dual effect of the following business transaction on assets and liabilities of a business unit. a)Purchased goods for cash for Rs. 500. b) Purchased goods on credit for Rs. 800 . c) Paid Rs. 300 to a creditor. d) Received Rs. 500 from a debtor.

Mr. Vinod Pandey started business. State which of the following transactions, and with what amount, are to be recorded in the books of his business. a)He purchased a machine from Bombay for Rs. 10,000. He paid for railway freight Rs. 200, and local transport Rs. 100. b) He sold goods worth Rs. 1,000 to Mr. Rakesh. c) Mr. Ramana, a friend of Mr. Pandey promised to purchase goods worth Rs. 10,000 after three months. d) He purchased a building for his business from his friend for Rs. 25,000. Its market value is Rs. 30,000. e) Due to scarcity of raw materials, he paid Rs. 5,000 for materials worth Rs. 3,000.

The assets and liabilities of Rupak Store are given below. Find out the amount of capital. Cash Rs. 1,800; Stock Rs. 3,000; Debtors Rs. 2,000; . Furniture Rs. 1,200; Creditors Rs. 2,500, Wages payable Rs. 500

Present the following in the form of an Accounting Equation. Machinery Rs. 20,000 Cash Rs. 5,000 Capital Rs. 20,000 Creditors Rs. 5,000

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Present the following in the form of an Accounting Equation.
Machinery Rs. 20,000
Cash Rs. 5,000
Capital Rs. 20,000
Creditors Rs. 5,000

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Learning Pundits Content Team
Written on Apr 17, 2019 3:30:50 PM

Capital+ Liabilities = Assets

Capital Rs. 20,000 + Creditors Rs. 5,000 = Machinery Rs. 20,000 + Cash Rs. 5,000